SSE/EFI Working Paper Series in Economics and Finance
No 285:
Capital Subsidies and the Performance of Firms
Fredrik Bergström
Abstract: : In many countries, governments grant different capital
subsidies to the business sector in order to promote growth. Also the EU,
provides this type of subsidies. As De Long and Summers (1991) suggest
there might be market failure justifications for public subsidisation of
firms. However, because the use of subsidise is not unproblematic, it is
far from clear how they affect long-run economic growth. This study
examines the effects on total factor productivity of public capital
subsidies to firms in Sweden between 1987 and 1993. Panel data which
distinguish between subsidised and non-subsidised firms in the
manufacturing industry are used. The results suggest that subsidisation can
influence growth, but there seems to be little evidence that the subsidies
have affected productivity.
Keywords: Industrial policy; regional policy; capital subsidies; total factor productivity (TFP); (follow links to similar papers)
JEL-Codes: H20; H81; L52; L98; O20; R58; (follow links to similar papers)
19 pages, November 23, 1998
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